Pay Equity Information & Recommendations
As some of our clients may be aware, there is a wave of new laws being enacted regarding pay equity. These laws are designed to address the gender wage gap by restricting a company’s use of salary history. The thesis is that eliminating salary history in job offers will stop perpetuating the wage gap. We would encourage all our clients, in consultation with their legal counsel, to determine how best to approach the situation. With that said, we have compiled the latest information as it relates to the active and pending legislation.
These laws treat salary history as a protected status (like race and age). As actual salary history cannot legally be correlated with the value of the individual in these jurisdictions, companies will need to rely on a candidates’ skills, experience, references, interviews, and other factors indicative of qualification during their assessments. “Salary history” typically should be interpreted broadly and encompasses base salary, commissions, benefits, and other forms of compensation such as bonuses, retirement plans, and allowances. Salary history must not be relied upon as proxy for determining the extent of a candidate’s experience, value, or market rate. Even if their compensation is publicly available, it cannot be used as the sole basis of the hiring decision; in New York City, even searching for publicly available salary history will qualify as a violation.
Also, it should be noted that it is not a violation in any of these jurisdictions if a candidate voluntarily discloses their salary history without provocation/prompting (meaning if the average job applicant would not think that the company is encouraging the disclosure based on the overall context and the company’s words or actions); – this opens the door for companies to have a discussion about prior compensation. Importantly, the laws regulate the actions of company, not the candidate. For example, if a candidate discloses their prior or current salary during the natural course of conversation (without first being asked, incentivized, tempted, or otherwise provoked), companies may respond accordingly to address, discuss, and confirm salary history. On the other hand, a prior compensation section of a questionnaire or form to be completed by a candidate will qualify as an illegal inquiry/provocation of salary history, even if the form states that the section is “optional” or includes a disclaimer stating that applicants in a certain region need not answer the question. Additionally, if a candidate’s compensation is found on a website or other publicly available source, companies still cannot ask about it. New York City’s ordinance specifically addresses this point, and it is implicit in the remaining jurisdictions; the laws explicitly prohibit the action of direct inquiries and the fact that salary history may already be known does not provide an exception to the rule.
Determining whether an employer is subject to legal scrutiny under these laws will depend on the specific circumstances of each case – generally focusing on the location of the position and the candidate. Any search located within these jurisdictions certainly will be impacted by the new laws, and it is likely that all applicants, from any geographic region, applying to a position located within those jurisdictions will receive legal protection as well. The extent of the legal scope in other circumstances, such as determining whether a candidate located in New York City for a position in Arizona (where no such legislation currently exists), may additionally depend on the amount of contact each party has with the jurisdiction in question. This means that the more contact or interactions an employer has with that jurisdiction (essentially, the more it’s presence is felt), the more likely it is to be subjected to the laws within it, and vice versa.
Companies should also understand the types of actions that remain unaffected by the new laws. In all jurisdictions, candidates may still be asked about their expected or desired compensation (as opposed to salary history) at any time. Member firms should be aware of foreseeable responses to these inquiries which may be problematic. Massachusetts and Oregon do allow inquiries into salary history once an offer has been made; however, this is of little value in the process unless it is perhaps used to support the candidate’s counter request for additional compensation.
These are some of the most prominent issues related to pay-equity legislation, but this list is not comprehensive. Companies are advised to review, evaluate, and adjust their practices accordingly. Important issues and strategies to consider include, but are not limited to: